Denny Hecker closes 6 car lots, sells 3; GM sues

  • Article by: MIKE MEYERS and LORA PABST , Star Tribune staff writers
  • Updated: November 22, 2008 - 12:17 PM

About 400 workers -- a third of Hecker's workforce -- are being laid off. General Motors also filed suit to bar Hecker from selling Hyundai vehicles in his Southview Chevrolet showroom.

Six of flamboyant Twin Cities auto dealer Denny Hecker's dealerships have closed and three others have been sold.

In a news release late Friday, Hecker said the shutdown of the Blaine Bargain Lot, Forest Lake Chrysler Jeep Dodge Mitsubishi, Monticello Dodge Ford and Mercury Suzuki Kia, Rosedale Hyundai, Shakopee Chrysler Jeep Dodge and Stillwater Ford Lincoln Mercury has resulted in layoffs for about 400 employees, about a third of Hecker's workforce.

In addition, Hecker's Inver Grove Heights Hyundai, Inver Grove Heights Volkswagen and Peninsula Dodge in Redwood City, Calif., were sold.

"The decision to realign our dealerships came as we found ourselves in the midst of a 'perfect storm' of economic bad news: a financial crisis on Wall Street, chaos in the housing market, consumer confidence at an all-time low and the sight of the Big 3 on their knees in Washington asking for a bailout loan," Hecker said.

It also came on the same day General Motors filed suit in U.S. District Court seeking to bar Hecker from selling Hyundai vehicles in his Southview Chevrolet showroom in Inver Grove Heights.

Jon Austin, a spokesman for Hecker, said the events are not connected. "This action announced today is unrelated to the GM action ... or that situation in general," Austin said. "I don't anticipate that the two would affect each other."

Though the dealerships that closed shut their doors immediately, Austin said arrangements will be made to assist customers with vehicles in for service.

The release issued by the company said customers may contact customer@dennyhecker.com or call toll-free 888-836-8383.

"If the repairs can't be completed, arrangements will be made for them to be completed at another dealership," Austin said.

A second Big 3 battle

The GM suit is Hecker's second legal battle this month with a Big Three automaker. Earlier this month, Hecker filed a federal suit against Chrysler Financial Services after it shut off the dealer's credit lines. Hecker claimed the move damaged his businesses.

Failing a move to ban Hyundai sales, GM wants court approval to terminate the dealer agreement with Hecker.

"If the dealer moves Hyundai to the GM facility, it will, as a practical matter, become a 'done deal,'" GM said in the court filing. "The two businesses will have already integrated into one facility with little or no prospect of 'unscrambling the egg.'"

Neither the Hecker dealership nor its lawyers responded to calls for comment on GM's suit.

But Austin said, "The status of the Southview dealership is unchanged.

"The lawsuit filed [Friday] has nothing to do with the closing of the other dealerships. The only common factor is that they both involve Denny." He wouldn't speculate on other changes in Hecker's auto empire.

GM said in its filings Friday that Southview Chevrolet's sales performance lags other dealers in the state and fails to meet GM's standards.

In addition, GM says, the dealership falls short on customer satisfaction surveys in comparison with other Minnesota dealers, and it has failed to meet contractual obligations to provide enough capital to keep the business a going concern.

"The dealership's performance is below acceptable standards," the automaker said.

The question before the court is whether Southview Chevrolet can "force" GM to comingle its brand with a direct competitor under the same roof, GM lawyers wrote.

"That is the functional equivalent to moving an entire Wendy's operation into a McDonald's restaurant," they say. "Or telling a Home Depot that they have to let Lowe's operate out of their facilities."

Claiming that the move violates a contract with GM, the Detroit automaker said the sale of South Korean Hyundais will likely undermine the sales and service of Chevy cars and trucks.

GM's policy seeks "complete separation of GM customer sales and service operations from those of its competitors," the automaker said.

Economic troubles build

Dealers such as Hecker usually borrow from the automakers to pay for inventory. But in recent months, stung by a plunge in sales and weak credit markets, automakers have begun pulling this financing.

Before Friday's sales and shutdowns, the Denny Hecker Automotive Group employed more than 1,200 people at 18 dealerships. The rent-a-car business employs 2,400 nationwide.

Minnesota's auto market has fallen 25 percent in the past five years, eliminating dozens of dealerships.

meyers@startribune.com • 612-673-1746 lpabst@startribune.com • 612-673-4628

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